- Freeport McMoRan (NYSE:FCX) fell another 4.2% in today's trade following its agreement with the Indonesian government to offload half its stake in the world's second largest copper mine.
- The government left no doubt as to who it believes got the better deal, as its Energy and Finance Ministries posted on social media that “Freeport is obedient, Indonesia is a sovereign state."
- “While there a lot of issues still to be worked out, politically this is a win for the government,” says Keith Loveard at Jakarta-based Concord Consulting. “It has taken on a big U.S. firm and appears to have won.”
- But Bloomberg's David Fickling thinks the winner is not so clear cut, as FCX has in effect taken on an equity partner to spread the risk and costs of working a project in challenging conditions; while the mine accounted for 47% of FCX's H1 operating cash flow, it also sucked up 61% of total H1 capex, or $431M - which likely would rise as the Deep Mill Level Zone and Grasberg Block Cave areas are developed.
- Fickling also notes that while the deal gives Indonesian Pres. Widodo a major political win, the collateral damage to the country's reputation could be significant; foreign direct investment in Indonesia's mining and quarrying industries slipped to a 10-year low last year and the prospects this year look even worse.
- Now read: About The Freeport Indonesia Deal
Original article